26 Nov 2008

IMF approves loan to Pakistan

10:29 am on 26 November 2008

The International Monetary Fund has approved a loan for Pakistan, amounting to $US7.6 billion to shore up the economy.

in a brief statement, the IMF said the loan will "support the country's economic stabilisation programme."

Pakistan will immediately access $US3.1 billion of the loan under a 23-month facility, with the rest phased in, subject to quarterly review.

The BBC reports Pakistan needs the money in order to avoid defaulting on international debt.

It was exploring other sources of funds to try to avoid stringent IMF conditions but failed to find a deal.

Pakistan's Junior Minister of Finance and Economic Affairs Hina Rabbani Khar was quoted telling a private TV channel that the IMF had not imposed any conditions for the loan.

Reports last week said the State Bank of Pakistan's reserves could cover only nine weeks of imports.

The BBC reports the Pakistani economy has grown by 7% to 8% over the past few years, but most of this growth has taken place in sectors such as consumer financing.

By 2006, trade imbalances because of high imports caused the economy to slow; a subsequent rise in international prices of food and oil worsened the situation.

This led to a fall in the value of the Pakistani rupee and a flight of capital from the country.